Putin ‘playing chicken’ with gas supplies as Russian economy
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Earlier this week, Ms von der Leyen announced plans to propose a price cap on Russian gas imports, in a bid to cut the revenues that the European Union sends to Vladimir Putin. The plan, packaged with four other proposals, sent shockwaves across Europe, as many countries were largely taken by surprise by these planned measures. The energy crisis facing Europe has grown more acute after Russia’s state-backed energy giant Gazprom “indefinitely” suspended gas supplied through the Nord Stream 1 pipeline to Germany work last week.
This plan also led to tensions escalating between Russia and the EU, with the Russian President threatening to halt all supplies if they took such a step.
The Commission’s five proposals for tackling the European energy crisis had “blindsided” member countries, with many of them split over the plans, six diplomats told POLITICO.
Aside from setting a price cap on Russian gas, Ms von der Leyen proposed four other “immediate” moves to help curb Europe’s crippling energy crisis.
These include mandatory measures to reduce electricity demand, a cap on revenues for companies generating electricity from low-cost sources like wind, a solidarity tax on fossil fuel companies making big profits, and facilitating support for ailing utility companies.
Following a meeting of EU ambassadors, only two of the proposals received support from both the EU countries and the Commission.
First of these was the plan to provide credit to help utility companies trade on energy exchanges during times of skyrocketing wholesale prices.
The second of the popular proposals include plans to tax the profits of inframarginal producers, which are low-cost energy generators like wind and nuclear, that are currently raking in record profits by selling electricity at market prices.
Under the Commission’s plans, these “unexpected profits” would go towards helping consumers, although EU ambassadors demanded assurances that these profits would stay in the right country.
However according to EU diplomats, plans to impose a price cap on Russian gas have been the most contentious measure, which is primarily aimed at punishing Putin financially for the war in Ukraine.
The member states reportedly have “very contradictory views”, one EU diplomat noted, with Germany noting that it is “sceptical” about the idea.
Meanwhile, Hungary, which is Russia’s closest ally in the EU, is against the plan and is supported by Slovakia and at least two other countries.
Countries including Italy and Poland want the bloc to cap the price of all natural gas imports, which Brussels has largely opposed so far.
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Diplomats noted that Hungary has demanded that any energy package needs to be unanimously agreed upon, rather than being approved with majority voting as part of emergency procedures.
Meanwhile, Poland has blamed the EU’s Emissions Trading System for causing the price rise, but it faced stiff opposition from Luxembourg, Ireland, Germany, Finland and Sweden.
While EU nations broadly agree that cutting electricity demand is important, countries including Bulgaria, Hungary, Greece and Poland have opposed plans to make the cuts mandatory.
EU energy ministers are due to hold an emergency meeting on Friday to discuss how to tackle the energy crisis.
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